Question 1: If it takes one hour to travel from New York City to Washington, D.C. by air, but it takes five hours by bus. If the airfare is $110 and the bus fare is $70, which would be cheaper for someone whose opportunity cost of travel time is $6 per hour? For someone whose opportunity cost is $10 per hour? $14 per hour?
Question 2: The Tables below show the production possibilities for two hypothetical countries, Italia, and Nire. Which country has the comparative advantage in producing butter? Which country has the comparative advantage in producing guns? What would be a mutually agreeable rate of exchange between the countries?
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ITALIA
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NIRE
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|
|
|
|
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Guns
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Butter
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Guns
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Butter
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12
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0
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16
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0
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8
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2
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12
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1
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4
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4
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8
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2
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0
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6
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4
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3
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|
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0
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4
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